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Risk Management Module 1

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Robertas Kurakovas

Risk - Basic Concepts

Risk - Basic Concepts
Risk Management

Module 1

This lecture

Basic concepts

Managing Risk

A. Classifications of risk

Sources of Risk

Effects of Risks

Risk characteristics

B. Risk decisions


Definition of Risk

Decisions under risk

C. Perspectives on risk


Risk according to normative perspective

Risk Analysis

Analysis of investment scenarios

Describing and analyzing risk

Rational decisions & risk

Rational choice

The descriptive perspective

One source of heuristics

Decisions & bounded rationality


Risk Decisions

The Social context of decisions

Framing of a risky decision

Prescriptive process tool

Risk decisions may be analyzed to:

Risk decision Example:

Investment decisions under risk

An example of a capital investment

The context of the decision

DM value assumption

Investment & decision rules

Cash flows

Cash flow analysis

Scenarios in capital investments

Analyzing the following risks

Risky/uncertain cash flows

Analyzing risky cash flows

Describing and analyzing risk

Investment decisions under risk